Sellers Dilemma: To Disclose or Not to Disclose ; The Solution: When In Doubt Disclose!

- The Fact Scenario. Buyer and Seller meet. They strike a deal and sign a Purchase Agreement. Buyer receives Seller’s Transfer Disclosure Statement. Buyer reviews and sees nothing objectionable on Seller’s Disclosure Statement. Buyer decides not to have property inspected. The deal closes and everyone lives happily ever after - until - the Seller gets the phone call with the dreaded news that the Buyer has found serious physical defects in or other problems with the property. Say for example, the Buyer reports that the back wooden deck is collapsing, or that the neighbors have just erected a gate across the driveway, claiming it is theirs!

- Typical Defects and Problems. These can include, without limitation, roof leaks, soil settlement, basement flooding, pest infestation, failure of foundation or structural framing, faulty plumbing/septic, drainage problems, electrical wiring code violations, boundary line disputes and encroachments, unrecorded easements, pending improvement assessments not showing of record, improperly installed wood burning stoves, zoning violations with the house or outbuildings, room additions, garage conversions or other remodels or improvements that are not to code, were not constructed by licensed contractors, are without proper permit, and have never received final inspection and occupancy approval. The list is endless, but the concern is clear.

- A Common Mistake. All too often sellers believe that they really don’t need to disclose everything they know about, or all the problems they have had with, the Property. This is a dangerous and misplaced belief. The basic rule is that the Seller must disclose any known defects or problems they have experienced with the Property which a reasonably prudent Buyer would likely consider material and important when making a decision to buy. This would obviously include all of the defects and problems listed above, and more. Invariably, the problem the Seller thought would never come up again, or would not be discovered, or was “fixed” and therefore need not be disclosed, is usually the problem that rears its ugly head at the most inopportune time. Murphy’s Law strikes again!

- The Danger. If it turns out that the Seller intentionally, or even negligently, failed to disclose a material defect in or problem with the Property, it could become a very expensive and inconvenient situation. The Buyer’s remedies range anywhere from forcing Seller to pay for all needed repairs, to a full rescission and cancellation of the entire purchase transaction, including a refund of the total purchase price, transferring the Property back to the Seller, and being awarded attorney’s fees, court costs, and any other damages incurred by the Buyer in the deal.

- The Irony. The sad part about this is that it can easily be avoided. More often than not, the Buyer has fallen in love with the property and is usually willing to look past, or at least reasonably negotiate, most problems and defects that they learn about. Further, just because the Seller discloses a problem does not necessarily mean the Seller must fix it. The normal case is that these matters are left to negotiation between the parties, and they are usually worked out. The key is making the disclosure in the first place. The potential for trouble starts when the disclosure is never made or is made in a deceptive or incomplete manner, because the Buyer can always claim that, had the defect or problem been fully and properly disclosed, as required, the Buyer would never have bought the Property in the first place, or the Buyer would have inspected and investigated the manner further, with the very real possibility that adjustments to the purchase price or other terms of sale would have been insisted upon.

- Moral of Story. When in doubt -DISCLOSE! It can save a lot of time, headache and expense in the long run, and it certainly makes for better relations between Buyers and Sellers. Remember, in connection with the sale of any residential real property in Washington State, whether it be a For Sale By Owner deal, through a real estate broker, or otherwise, the Buyer must receive such Real Property Transfer Disclosure Statement from the Seller. See Revised Code of Washington, Chapter 64.06, for the requirements concerning, and some of the pitfalls involved with, such seller disclosures required in residential property sales.